What's up with the job market for new college grads?

  1. Listen Job market for recent college grads

    Kerri Miller chats with Rampell and Sum on Midmorning

Employment rates are up a bit, but optimism is at new lows among recent college grads.

MPR’s Kerri Miller talked with two labor market watches to find out what’s going on, and what job hunters can expect.

Below are the highlights of the interview. (They’re from my notes, so quotes are not verbatim.)

First the guests:
Catherine Rampell, New York Times economics journalist and editor of its Economix blog on nytimes.com
Andrew M. Sum: Professor of Economics and Director of the Center for Labor Market Studies at Northeastern University
And some resources:

gradjobsmidmorning

Miller: A new Rutgers survey has sobering news: It surveyed college grads from the 2008-10 classes, and found many struggling – in jobs that don’t need a college degree, or not working at all, or in part-time jobs. Faced with such dismal results, the survey author said that even college grads are expressing doubt in the cornerstone of the American dream – that each generation will do better than the one before.

… What I found most startling was the statistic that 50 percent of all those from classes 2008-10 are working have been in jobs not requiring a college degree.

Rampell: There are fewer positions open in general, in part because older workers can’t retire. Many are downscaling – bartending, waiting tables, driving taxis.

M: So they’re not getting pay and benefits commensurate with college degree.

Sum: Yes, weekly wages of non-graduates tend to run well below those of college grads. And when you’re malemployed, you’re significantly less likely to receive training from an employer. On top of that, many working outside the “college labor market” (the market for better-paid jobs traditionally requiring college degrees) work fewer hours and fewer weeks.

M: What’s “malemployed” versus underemployed?

S: Underemployed is when you work part time. Malemployed is working at a (usually lower-skill) job that doesn’t require the skills that you have.

R: even if you start out in a job that requires a college degree, you’re going to start at a lower salary point. So your earnings trajectory is going to be much lower in your first 10 years. Rutgers asked recent college grads both before and after the recession what their salary was at beginning (of their first jobs). It was 10 percent less for graduates post-recession.

M: So consequences will be seen for some time to come in their careers?

S: Yes. Part of the reason the salary differential stays with you is the difficulty in making the transition to the college labor market. So I encourage college grads always to look for the chance to make that transition as soon as possible.

M: So beware of lingering too long in a low-end job, because it could have consequences?

S: Yes, and employers see those who’ve been out of school and out of their field for a while as people whose skills have atrophied.

Listener: I notice a company trend. Companies hire graduates as temps. If the new hires prove themselves, they’ll be considered for a full-time position. My manager, for example, had to fight for a full-time position (for me) at the company where I’d started as a temp.

M: Are you seeing a lot of youth having to come in part-time to get a foot in the door?

R: We’re seeing it across the board. Employment at temporary employment services was way up, which is a good sign, because employers were finally putting their toes in the water in a lead-up to permanent hires. Lately the number of temp-hirings is flat, which is a little worrisome, because there are still so few permanent hires in the workforce.

M: President Obama has been telling employers, “You’re sitting on a lot of cash, you’re not hiring, you’re just talking.” What gives?

S: Part of it has to do with the expectation that growth would pick up over the last few months, and it still hasn’t achieved that. A lot of factors are driving that behavior. Absent that certainty (of an economic uptick), a lot of small employers have shown a tendency not to hire, or hire temps, because they’re easier to get rid of. And if demand picks up, they’ll be in position to (hire them full-time). But what’s missing in this discussion is that it’s the first recovery we’ve had in the U.S. where we haven’t yet recovered our jobs, and it’s a wageless recovery. I think 94 percent of company earnings went to corporate profits – not hiring. It’s true that companies are sitting on lot of cash. They’re not being used to hire or pay workers more, even though productivity of American workers rose 7-9 percent.

R: Because a lot of small businesses are trying to keep low head count, they’re spending on equipment and technology. At least with a capital investment, an employer knows what the costs are going to be. With workers, you don’t know what you’ll be paying them next year if you guarantee heath insurance costs, and those costs then skyrocket.

R: Upper-income workers were not as hard it, which is usually the case, because they’re higher skilled. There was not as much of a dip, and for the most part they’ve recovered. Those with lower skills or with no or little college are doing especially badly. There’s a threat of a widening gap between the highest-skilled workers and the least-skilled, especially if you have college grads squeezing them out of bartending jobs.

Caller: I searched four months for job in the field I wanted to do, but then had to scale back. Employers just wanted candidates with far more experience. So if they can get access to internships or programs like Americorps, it might give them a leg up.

M: Employers can now demand more experience, but they’re not necessarily paying for it.

S: Our research shows college students who can participate in cooperative programs – such as spending a semester studying, the next one working, and so on – or internships, have a much smoother time transitioning into college market jobs. In one study, most students said they should have held more internships or should have embarked on their job search earlier in college. Job experience is a very important selling point

M: If you’re an employer in a job market like this, and want to fill a job where traditionally you would look for 2-3 years of experience, do you now have the luxury of saying, “We can go with someone with 5-6 years of experience?” If so, what does that mean for younger workers?

S: It depends on the salary differential (between experienced workers and recent grads). If there’s not a large salary differential, they’ll go with the experienced worker. Otherwise, they’ll go with the younger worker. Many employers are looking for someone new – especially in areas such as computer programming. And data shows still the job outlook depends a lot on what you’ve majored in college. Those who’ve studied areas such as engineering, business, health, computer science find it easier than those in the humanities and area studies — both in job outlook and salary earnings over a lifetime. In the Rutgers study, a lot of students said, “I would have been more careful in selecting a major.”

Caller: When I hire, I find college grads woefully unprepared for the workplace.

Caller: I’ve been looking for jobs to give me experience in the education sector, but have been looking more and more away from that lately because I need a job. My fear is that though I’m getting a little older for the education sector, I’m worrying I’ll be missing those skills when get other jobs just to pay the bills.

R: The job market is tough for everyone, even for this “most protected class.”

Caller: I graduated with a two-year degree as a registered nurse. Now everyone wants a 4-year RN. It’s frustrating when they’re suddenly raising the bar.

Caller: I graduated in December 2008 as an English and theater teacher. I had to move to Bemidji to get a job, which is hard, because my husband is in St. Paul. I’m the only one (of my group) working in my field.

M: I’m confused. I keep hearing teachers are retiring, and that we need teachers especially in science and technology, but then we hear those types of stories.

S: The same thing is happening as with the RN jobs. RNs used to have multiple job offers. But as economy the slowed, there was restructuring. As time goes by, you would expect the economy to improve and the health care sector to improve, and then you would get some replacement demand because of retirees. (But that’s not happening.) At the teacher level you have the same problem. A lot of local governments have no more federal stimulus money, and are having issues with property taxes and deficits. In the short term, the problem is far worse than many expected, but I’d like to think that as the economy improves and replacement demands there will be more job opportunities.

R: When the economy was booming in the 2000s, even those with prison records could get work. Now employers can afford to be picky.

R: If you look at the data, the share of recent college grads who have jobs is much lower than the comparable rate for their counterparts a decade ago.

S: It has become harder overall for grads with bachelor’s degrees. Fewer people are getting employed, and fewer get jobs related to their field. It is, in many respects, a radically different labor market.

S: The job market for young people under age of 30 as practically wiped out. We saw a much better market for workers over the age of 55. And a large number of these have postponed retirement to substantial degree, so there is a lot less replacement demand. One thing we could have done as country but didn’t was this: We passed a bill in the late 70s that was a new jobs tax credit. If you hired a new person (the government) would give 30 percent off that wage. We encouraged Obama to do this. Instead what we did is we’ve given a large tax incentive for new capital projects, research and development and such, so companies don’t have much incentive to hire workers. But there’s still a chance to do that.

R: With those capital project tax credits, the hope was that when a company invests in new machinery or software, that will complement hiring. For example, a company would buy a tractor, plus a worker to drive it. There’s a debate about whether that happens, whether one is a substitute or complement to the other. Last year there was a hiring tax credit, not well publicized, that if you hired someone who’d been long out of work, you wouldn’t have to pay their share of payroll tax. It’s no longer in effect, and the employers who took advantage of it probably would have hired those workers anyway.

Caller: I work with my company’s college hiring program. Three things have stood out. This group socially networks unlike any group I’ve seen. They’re very aggressive about making and nurturing connections. And the entrepreneurship – a lot of students had apps that they’d been selling. There’s been a lot of talk about employers raising bar. But the assertiveness of students is raising the bar, making a competitive process even more competitive.

S: (Topic switches.) The various pessimistic views we hear do have some basis in fact. But a recent national survey by the National Association of Colleges and Employers shows that hiring managers this fall plan to more hire young college grads – up by 19 percent. Of course, much of this is for those in engineering and scientific areas, nursing and math.

Caller: I’m a registered nurse and premed student. I notice a lot of my peers are unable to find work in their field, so they go on to grad school. We hear grad school is the new undergrad – you can’t find a job without an advanced degree in my group.

R: Anecdotally, I hear of a lot of professions where having masters or Ph.D. is required, because so many more people are graduating, and so a degree means less. People with more skills are more protected during recessions. If you are going back to school now, you can recycle back into job market when it’s better.